US won't retry watchdog whistle-blower case

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Last Updated: Thu, Jan 03, 2013 17:15 hrs

The Justice Department said Thursday it will not try again to sue a watchdog group that shared money from a whistleblower settlement with a government economist more than 14 years ago, following a mistrial in the case last month.

The department told U.S. District Judge John D. Bates of its decision at a hearing on Thursday. In December, a judge filling in for Bates declared a mistrial when the eight jurors in the civil case failed to reach a unanimous verdict.

In 1998, the Project on Government Oversight paid Richard A. Berman, then a government economist, nearly $400,000 from a $1.2 million settlement for exposing oil companies' underpayment of royalties to the government. The Justice Department argued the payment violated a federal ban on supplementing the salary of an executive branch employee. POGO and Berman had faced fines, but no jail time.

The jurors had split 7-1 in favor of the government against both POGO and Berman.

On Thursday, after Justice Department lawyer David Finkelstein said the government would not retry the case, Bates asked POGO's lawyer, Ross Nabatoff, if he wanted to say anything. Nabatoff declined, prompting Bates to quip, "You're happy to escape by the skin of one juror?"

"It only takes one," Nabatoff replied.

The case had dragged on for a decade, with two previous government victories reversed on appeal. POGO's executive director, Danielle Brian, said after the hearing she was surprised by the government's decision not to pursue the case.

But that's not the case for Berman. In March, Bates agreed with the Justice Department that Berman had breached his fiduciary duty to the government by working on royalty issues that could help POGO win its lawsuit, and said he had to cough up the money POGO paid him. Berman appealed, but the appeals court said it was premature. Berman, who is representing himself, said Thursday he will now pursue that appeal.

The Justice Department had no immediate comment.

In 1996, POGO asked Berman to join its false claims lawsuit against major oil companies for underpaying royalties to the government. He declined, but the group agreed to pay him a one-third share of its take from the lawsuit.

The following year, POGO filed its lawsuit in the U.S. District Court for the Eastern District of Texas. The group alleged that the major oil companies had violated the False Claims Act by undervaluing oil they extracted from federal and Indian lands, thereby underpaying royalties to the United States. The U.S. government intervened in that and other false claim suits, leading to settlement agreements that ultimately totaled $440 million. Under the False Claims Act, whistleblowers can share in any recovery of money based upon their disclosures. POGO's take was $1.2 million, and in 1998 it gave Berman a check for $383,600 as a "Public Service Award."

In January 2003 — 10 years ago this month — the Justice Department filed a civil complaint against both POGO and Berman, and won its first victory in a judge's ruling the following year. U.S. District Judge Thomas Penfield Jackson ruled that the payment illegally supplemented Berman's salary as an economist for the Interior Department.

But the U.S. Circuit Court of Appeals for the District of Columbia faulted Jackson for concluding, without a trial, that the money was compensation for his government work, rather than for what he did as a whistleblower outside the scope of his work, as POGO argued.

So, in 2008, the case went to trial and a jury decided that POGO and Berman had violated the law. By then, Jackson had retired and a new judge, Bates, was overseeing the case. Bates assessed a civil penalty for Berman equal to the money he had received from POGO. But the judge, concluding that POGO had given the check in good faith, penalized the group only $120,000.

That ruling was reversed on appeal, too, leading to last month's trial.